A new study identifies the growing need for business leaders to consider the broad implications of choosing where to put down roots as the world shifts toward a knowledge-based economy.
By Sarah Steimer
You take the time to know your customer, your competition, the market, and how to manage employees — but are you giving enough forethought to where your business is located?
“The location decision is one of the most important decisions a company can make — and it’s hard to undo,” says Richard Florida, a professor at the University of Toronto and the author of a new paper in Global Strategy Journal.
In the paper, Florida and co-author Patrick Adler, an assistant professor at the University of Hong Kong, define the key concepts of locational strategy and highlight its importance in a company’s overall business strategy. They draw on key concepts from management theory, corporate strategy, and economic geography — along with their time teaching a course on the topic at the University of Toronto — to describe locational strategy. The framework, they argue, can be used to understand how an organization’s geographical decisions impact everything from branding to human resources to research and development and beyond.
Despite the massive impact that locational strategy can have on a business — even in an era of remote work — the authors note that the concept is rarely given the weight and forethought it deserves. They argue for the topic to be included in both MBA training and management training more broadly.
So why consider enhancing your own understanding of locational strategy? Florida and Adler highlight a few key trends: the growing shift toward a knowledge-based economy; increasing competition in dynamic efficiency; the rise of corporate locational tournaments, such as Amazon’s HQ2 and Tesla’s Giga-factory; and the increased use of large tax-payer incentives to underwrite corporate location decisions.
Florida R. & P. Adler (2022). Locational strategy: Understanding location in economic geography and corporate strategy. Global Strategy Journal. https://doi.org/10.1002/gsj.1456.
Sarah Steimer is a Chicago-based writer and editor with experience in magazines, newspapers and multimedia projects. She has covered subject matter that spans local news, marketing, medicine, food and more.